Question

A recent graduate took her first job with an investment bank with a signing bonus of $4,000.00. She decides to invest the bonus into a mutual fund that pays 8.00% per year on average. What will be the value of this investment in 20.00 years?

Answer Format: Currency: Round to: 2 decimal places.

Answer 1

Using future value of annuity formula , we can calculate the value of investment in 20 years
Future value of annuity = P*{[(1+r)^n - 1]/r}
Future value of annuity = value of investment in 20 years = ?
P = Yearly investment in mutual fund = $4000
r = Average return per year = 8%
n = number of years = 20
Future value of annuity = 4000*{[(1+0.08)^20 - 1]/0.08}
Future value of annuity = 4000 * 45.76196
Future value of annuity = 183047.86
Value of investment in 20 years = $1,83,047.86